JK Harris Settles Claims Over Federal Tax Debt Reductions

JK Harris Co., a tax representation firm based in Charleston, S.C., will pay to settle claims by West Virginia's attorney general's office that it misled consumers about its tax-dispute resolution services.

Under the settlement, which resolves a contempt complaint, JK Harris will pay $14,180 in full refunds to four consumers. A key issue involved complaints that JK Harris told consumers the firm could negotiate a reduction in their federal tax debts through the Internal Revenue Service's "offer in compromise" program, when in fact many customers were not eligible.

West Virginia was one of 18 states that jointly settled with JK Harris over the claims in 2008. JK Harris paid $1.5 million in restitution and agreed to change its advertising, without admitting any wrongdoing.

The company also settled a class-action lawsuit in 2007, for $6 million, but stopped making payments toward that settlement in early 2010 due to cash-flow problems. Future payments, under a court-approved change to the settlement, depend on JK Harris' income and debt payments.

"In the previous consent order, JK Harris agreed to stop falsely representing to ineligible consumers that they qualified for an OIC with the IRS and to stop charging consumers any fees to apply for the ... program unless the company could demonstrate that the consumers were, in fact, eligible," West Virginia Attorney General Darrell McGraw said.

Since the 2008 settlement, McGraw's office received complaints from four consumers who paid fees to JK Harris after they were told by the company that they qualified for OICs but actually did not. JK Harris spokesperson Gina Anton said the company was happy to reach the settlement with McGraw's office.

"The four clients referred to in the attorney general's press release represent four complaints in a three-year time period," she said. "Only two of these clients were actually contracted for the offer in compromise program."

South Carolina, JK Harris' home state, was not among the 18 states that reached a settlement in 2008. Then-Attorney General Henry McMaster withdrew from the multi-state investigation in 2005, saying he found "no appropriate basis" for a civil action.

At the time, he said "activist" attorneys general had "crossed the line and were getting involved in cases they should not be involved with."